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The Spirit of Accounting: There is so much wrong here on so many levels

Published

1 year ago

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Seemingly out of nowhere, a bizarre document emerged in July from the bowels of Congress that threatened the SEC’s funding for reviewing the Financial Accounting Standards Board’s performance unless the commission nullified the board’s standard on accounting and reporting for income taxes.

It doesn’t take a genius to realize that some lobbyists leaned on members of Congress on behalf of their disgruntled clients from the ranks of public company managers and their auditors. Their complaint seems to be that they don’t like having to tell the truth, the whole truth, and nothing but the truth with clarity.

There is so much wrong here on so many levels including these topics: (a) funding an independent regulatory agency, (b) the SEC’s role in setting standards, (c) the FASB’s due process, (d) the role of useful information in promoting efficient capital markets, and (e) the role of capital markets in producing an efficient and growing economy.

This effort has produced a new low bar by being the most misguided self-seeking but self-destructive action by the lobbyists’ clients in the history of financial reporting standard-setting. It eclipses even the clumsy efforts by the Business Roundtable in 1988 to cajole the SEC into giving it full control over FASB’s standard-setting agenda to bring an end to what the CEOs considered to be misguided efforts to reform practice.

Let’s look at these five levels to see how transparently unwise this effort is.

Funding the SEC

Apparently excluding these empty-headed folks, most people involved in public financial reporting know the SEC is an independent agency that is not a part of either the executive or legislative branch. This arrangement was established in 1933 to keep politicians’ hands off the capital markets so they can function as efficiently as possible for the benefit of the entire economy and thus the entire population.

Yes, the SEC does receive funding from Congress, but it also relies heavily on fees paid by those it regulates and protects. I’m hard-pressed to find a weaker-minded scheme to allow a few members of Congress to short-circuit this established process with a goal that is directly contrary to achieving efficient capital markets.

In a few words to them — keep your soiled hands off the Commission’s budget. It’s far more important to the rest of us than to all of you.

The SEC’s role

It has taken many decades with many false starts and failures as well as many good intentions and decisions to arrive at the present system for setting financial reporting standards. No one should confuse it for the best possible system, but it is far better than anything else has been.

To explain, the SEC relies on independent experts at FASB to sift through the possibilities to produce suitable standards through an extensive unbiased and open due process that provides for substantial analysis and comments. Once that process is completed and standards are issued, they become essentially the “law of the land” with regard to public company financial statements.

In a few words to these misguided politicians — keep your self-serving hands off the SEC’s reliance on this crucial system.

FASB’s due process

These turkeys seem to believe their opinions should supersede all the effort and thinking that went into FASB’s due process that led to the standard. 

They had their chance to plead their case in hearings, comment letters and other ways. I haven’t looked up the record, but I’m confident they either did not participate at all or simply complained that they didn’t like the idea of telling the markets more about corporations’ tax-related outcomes. 

It’s obvious they’re trying to cover up the truth about taxes to keep the capital markets uninformed. What’s equally obvious is they have no idea how that outcome actually affects them negatively.

I say this to these whiners — keep your ignorant hands off this carefully built process that has allowed you an opportunity to make reasoned arguments, not political threats, to support your goal of keeping useful information away from the capital markets. You lost and now need to live with the outcome without trying to change the rules.

The role of useful information in the capital markets

A decades-long consensus holds that capital markets are driven by three things: information, information and information. 

In the face of all the uncertainty about the possible outcomes in the markets, more investors’ money flows more readily to where the best information is available. The explanation is simple: useful information produces more certainty, more certainty reduces risk, less risk reduces a company’s capital costs, and lower capital costs lead to higher stock valuations.

Why, then, would these Congress members make inane threats to increase uncertainty by providing the markets with less information about taxes when the results would be greater uncertainty, more risk, higher capital costs and lower stock prices? I’m sure I’m not alone in recognizing the absurd outcomes of the actions they’re threatening to take.

In a few words to these economic boneheads, put your uneducated hands on some good books that explain how greater amounts of useful information provided more often and with more clarity will drive stock prices through the roof. Instead, they cling to the foolish notion that reporting less information will lead to higher stock prices. They are totally wrong. And wrongheaded to boot.

The role of capital markets in the economy

Finally, everyone should know that economies that have access to efficiently priced capital are able to function at their own higher level of efficiency. Simply put, lower capital costs are key to market participants’ being able to acquire productive assets and put them to use throughout the entire economy to lower costs for the producers while generating greater profits. In short, everyone would gain if the capital markets were to be inundated with more information that is understandable, trustworthy, timely and readily consumable.

Instead, these members of Congress who have threatened the SEC’s budget and FASB’s standards are essentially seeking just the opposite outcomes of inefficiency through higher capital costs, higher prices for goods and services, lower profits and lower stock valuations. 

How low can they go?

It seems to me the members of Congress and the lobbyists are not the dumbest actors in this play, however. In fact, I’m certain that this adjective applies best to the managers who hired the lobbyists to produce results that are just the opposite of what is actually good for themselves. How misguided can you be to spend money to end up worse off?

Finally, I say to them, keep your sleazy hands off the economic system that’s designed to produce a rising tide for all boats, even theirs. If they had a lick of common sense and honesty, they wouldn’t have gone down this road.

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Accounting

SEC’s Semiannual Reporting Proposal Faces Investor Pushback: What CFOs Need to Know

Published

21 hours ago

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August 25, 2026

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U.S. Securities and Exchange Commission (SEC)

A proposal from the U.S. Securities and Exchange Commission to potentially shift some public companies away from quarterly financial reporting toward a semiannual model is drawing significant pushback from investors, even as it continues moving through the regulatory process. The debate has direct implications for corporate finance teams, auditors, and the broader transparency of U.S. capital markets.

What the SEC Proposed

According to a summary published by accounting advisory firm Cohen & Co., the SEC issued a proposed rule on May 19, 2026, aimed at simplifying financial reporting requirements for many U.S. public companies. The proposal would potentially reduce the frequency of certain mandatory disclosures from quarterly to semiannual, a structural change that has not been made to core U.S. reporting requirements in decades.

The proposal follows an extended debate within U.S. policy circles, with proponents arguing that reduced reporting frequency could lower compliance costs and free up management time for longer-term strategic planning rather than quarter-to-quarter results management.

Why Investors Are Pushing Back

Comment letters submitted in response to the proposal have been extensive, and according to Cohen & Co.’s review of the public record, investors “appear to be largely opposed” to the shift, viewing frequent interim reporting as a core benefit of U.S. capital markets relative to other jurisdictions.

Accounting and law firms have taken a more measured position, generally urging any changes to remain aligned with the Financial Accounting Standards Board (FASB), whose existing disclosure requirements and guidance are built around a quarterly reporting cadence. A shift to semiannual reporting without corresponding changes to FASB guidance could create friction between SEC filing requirements and GAAP-based disclosure expectations.

Lessons From the U.K. Experience

The debate is not without precedent. The United Kingdom moved away from mandatory quarterly reporting for listed companies in 2014, returning to a semiannual disclosure requirement. According to Cohen & Co.’s analysis, that experience offers a cautionary data point: there was no measurable increase in capital expenditure or R&D investment following the change, while analyst coverage of affected companies declined as reliable interim information became less available — a particular risk for smaller and newly public companies that rely on analyst coverage to maintain investor visibility.

Practical Implications for Finance Teams

Beyond the debate over disclosure philosophy, the proposal carries practical complications. Many companies have debt covenants and credit agreements structured around quarterly financial delivery; a shift to semiannual reporting could require renegotiating those terms. Reduced reporting frequency would also extend the “window of market silence” between disclosures, a factor that governance and investor-relations teams would need to manage carefully to avoid information asymmetry.

Separately, and unrelated to the reporting-frequency debate, the SEC and FASB have continued finalizing more routine updates this year. New Accounting Standards Updates are taking effect for December 31, 2026, fiscal year-ends covering income tax disclosures, credit loss measurement, induced debt conversions, and stock compensation, according to Eide Bailly’s review of 2026 ASU activity. Additional guidance on paid-in-kind dividends and environmental credits is also on the near-term horizon.

What to Watch Next

The semiannual reporting proposal remains in the comment and review phase, and no final rule has been adopted as of this writing. Finance leaders should monitor the SEC’s regulatory agenda for further movement, while treating the current quarterly reporting requirement as the operative standard until any final rule is issued and an effective date is set.

Given the extent of investor opposition documented in the comment file, a full shift to mandatory semiannual reporting appears more likely to result in either a scaled-back compromise or continued study rather than swift adoption — though the SEC’s ultimate direction remains uncertain.

 

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Accounting

AI-Driven Automation and Continuous Accounting Frameworks

Published

2 weeks ago

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August 15, 2026

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The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

Published

2 weeks ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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